Nigeria’s energy sector is facing renewed pressure after fresh data revealed a decline in crude oil production, worsening domestic supply constraints and raising concerns about the sustainability of local refining operations.
Industry analysts say the drop in output could have far-reaching implications for Nigeria’s energy security, particularly as newly operational refineries increase demand for crude feedstock.
The development comes at a time when the country is struggling to balance export obligations, domestic refining requirements and commitments under international production agreements.
Domestic shortage worsens as crude output falls to 1.3mbpd
Nigeria’s crude oil production dropped to approximately 1.31 million barrels per day (mbpd) in February, deepening supply challenges for domestic refineries and widening the country’s gap from its output quota set by the Organization of the Petroleum Exporting Countries.
The latest figures, contained in the cartel’s Monthly Oil Market Report, indicate that Nigeria produced 1.314 mbpd in February, a sharp decline from 1.459 mbpd recorded in January.
The drop represents a month-on-month decrease of about 146,000 barrels per day, underscoring persistent challenges affecting the country’s upstream oil sector.
With the latest output figure, Nigeria again fell below its OPEC production quota of 1.5 mbpd, extending a trend of underperformance that has continued for several months.
Energy experts warn that the decline is not only affecting the country’s export revenues but also worsening the domestic crude supply situation required to sustain local refining capacity.
Refineries struggle with limited crude supply
Nigeria’s refining sector has been under intense pressure due to insufficient crude supply, particularly as new refining facilities increase the demand for feedstock.
One of the most affected facilities is the Dangote Petroleum Refinery, which recently ramped up operations and requires significant volumes of crude oil to operate at full capacity.
The 650,000 barrels-per-day refinery has reportedly been receiving fewer cargoes than required under the government’s naira-for-crude policy arrangement.
Industry sources say the refinery currently receives about five cargoes of crude per month, far below the 13 cargoes required to sustain domestic product supply across Nigeria.
As a result, the facility has been forced to source additional crude from international markets at prevailing global prices.
Officials at the Nigerian National Petroleum Company Limited have acknowledged the supply constraints and indicated that the company is exploring alternative solutions to sustain refinery operations.
According to industry insiders, NNPC has begun leveraging its global trading network to secure crude supplies from third-party international traders in order to support domestic refining capacity.
Persistent production challenges
Nigeria’s inability to meet its OPEC quota is not a recent development.
Historical production data shows that the country has repeatedly fallen short of its assigned output level, despite government commitments to boost production.
In 2025, Nigeria managed to exceed its OPEC quota in only three months—January, June and July—while remaining below the target for most of the year.
Production began strongly in January 2025 at about 1.54 mbpd, exceeding the quota by nearly 38,700 barrels per day.
However, output fell to 1.47 mbpd in February and dropped further to 1.40 mbpd in March, marking one of the widest production shortfalls recorded during the year.
Although modest improvements were observed in April and May, Nigeria remained largely below its OPEC production ceiling.
Analysts attribute the persistent production challenges to several factors, including oil theft, pipeline vandalism, operational disruptions and underinvestment in upstream infrastructure.
Government targets higher output
Despite the current challenges, authorities remain optimistic about the long-term outlook for Nigeria’s oil sector.
The Nigerian Upstream Petroleum Regulatory Commission has reiterated its commitment to boosting oil production in the coming years.
The commission’s chief executive, Oritsemeyiwa Eyesan, recently outlined a strategic plan aimed at increasing crude output and strengthening revenue generation from the upstream sector.
According to the commission, the plan focuses on three key priorities: optimising production levels, improving regulatory efficiency and ensuring sustainable operations across the oil industry.
The initiative aligns with the economic agenda of Bola Tinubu, which aims to significantly increase Nigeria’s oil production in the coming years.
Government targets include raising crude oil output to two million barrels per day by 2027 and eventually expanding production to three million barrels per day by 2030.
Officials say achieving these targets will require aggressive measures to recover shut-in production volumes, reduce operational losses and accelerate new oil developments.
Implications for Nigeria’s economy
Crude oil remains Nigeria’s most important export commodity and a major source of government revenue.
Therefore, sustained declines in production could have serious implications for the country’s fiscal position and foreign exchange earnings.
Lower output also complicates the government’s efforts to stabilise domestic fuel supply, particularly as refining capacity expands within the country.
Energy analysts note that balancing export commitments with domestic refining needs will become increasingly important as Nigeria seeks to reduce dependence on imported petroleum products.
The challenge, they say, lies in ensuring that sufficient crude oil is available both for export revenue and for supplying local refineries.
Outlook for the oil sector
Industry observers believe that Nigeria’s ability to improve crude production will depend largely on reforms aimed at strengthening the upstream sector.
These include improving security around oil installations, encouraging investment in exploration and production, and ensuring regulatory stability for international oil companies.
Experts also note that increased collaboration between government agencies, oil producers and security institutions will be essential to tackling oil theft and pipeline vandalism.
If these measures succeed, Nigeria could gradually close the gap between its current output and its OPEC quota.
However, until production levels improve significantly, domestic refineries may continue to face supply shortages that could undermine efforts to strengthen Nigeria’s energy independence.
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